New York-based Ambac Financial Group is seeking bankruptcy protection, because it has not been able to raise capital. Ambac Financial’s largest operating subsidiary is Ambac Assurance Corp., a Wisconsin-domiciled guarantor of public finance and structured finance obligations.
Ambac Financial Group is now seeking, with the assistance of senior debt holders, a restructuring of its debt through a prepackaged bankruptcy filing.
If the company is unable to negotiate a prepackaged bankruptcy filing, it will file for federal Chapter 11 bankruptcy, it said.
Ambac Financial’s board of directors voted on Monday to not make a regularly scheduled interest payment on the company’s 7.5 percent debentures due May 1, 2023. If an interest payment is not made within 30 days of Nov. 1, the 2023 notes would have an indenture of default, the company said, which would permit the holders of the notes to accelerate their maturity.
As of June 30, the company had a total debt of $1.62 billion. It also anticipates a $7 billion net operating loss.
In March, Wisconsin Insurance Commissioner Sean Dilweg was granted control of a segregated account of Ambac Assurance Corp., which was created for certain policies tied to credit derivatives, residential mortgage backed securities and related assets. The company created the segregated account at Dilweg’s request. It also started rehabilitation proceedings to settle liabilities related to assets within the segregated accounts, the company said.
Michael Callen, chairman of the board of directors of Ambac Financial Group, pledged cooperation with Dilweg’s efforts.
“In light of OCI’s determination to make some sort of rehabilitative action with respect to Ambac Assurance, the board has determined, after thoughtful and careful consideration, that compliance with the direction of OCI to establish the segregated account of Ambac Assurance and to consent to the terms of the proposed settlement agreement of our CDO and ABS portfolio is the best alternative possible,” he said. “While certain structured finance asset classes and other credits have been segregated for rehabilitation, virtually the entire insured municipal portfolio remains outside the rehabilitation proceedings.”
